Payday lending expansion is defeated by Indiana Senate panel

The Indiana General Assembly on Feb. 13 unanimously passed a resolution congratulating the Indiana Catholic Conference (ICC) on the 50th anniversary of its founding. The ICC represents the Catholic Church in Indiana on national and state matters of public policy. Pictured at left reading the resolution is Rep. B. Patrick Bauer (D-South Bend), who authored the bill. To his right are Glenn Tebbe, ICC executive director; Bishop Charles C. Thompson of Evansville; and Bishop Timothy L. Doherty of Lafayette. (Photo by Charles Schisla)

By Brigid Curtis Ayer

The Indiana Catholic Conference (ICC) celebrated a legislative victory after a bill to expand payday lending practices in Indiana was defeated on Feb. 16 by members of the Senate Insurance and Financial Institutions Committee by a 5-4 vote.

Glenn Tebbe, executive director of the ICC, who serves as the public policy spokesperson for the bishops in Indiana, joined 18 other organizations to testify before the panel in opposition to the proposal. He called the defeat of the bill “a victory.”

“There are better ways to help low‑income persons cover needed expenses rather than expanding a payday loan product with a 216 percent annual percentage rate [APR],” Tebbe said.

The proposal, Senate Bill 245, authored by Sen. Travis Holdman, R-Markle, was amended in committee to make it more palatable. Holdman said, “If we don’t get the bill to a place we are all comfortable with, it won’t move past second reading.

“We are not going to push this over the goal line until everyone is comfortable with the language,” he added. Some of the key changes of the amendment include: lowering the monthly interest rate from 20 percent to 18 percent; reducing the loan maximum amount from $2,500 to $1,750; removing late penalties; and reducing the payback time.

Tebbe told panel members during his testimony that even in its amended form, the Church remained concerned about the bill because it would encourage lower‑income persons to get trapped in debt and a process of recycling the loans. “We see this as a moral issue because it takes advantage of the distress that these families are in,” said Tebbe. “The Catechism of the Catholic Church says the seventh commandment is violated when people do things such as taking or keeping the property of others. This also includes business fraud; paying unjust wages; or forcing up prices and taking advantage of ignorance or hardships of another.

“Taking advantage of someone and exploiting them is wrong,” continued Tebbe. “I know that is not your intent here, but in our view, it is realistically the effect.”

Kathy Williams, who represents the Indiana Community Action Coalition, said while she appreciated efforts to reduce the interest rate of payday loans, the interest rate would still be 18 percent per month and a 216 percent APR, a rate that is far too high for lower-income borrowers to shoulder. Williams said research on low‑income borrowers by the Pew Research Center, a non‑partisan think tank based in Washington, indicates loans should not exceed 5 percent of a person’s monthly income, but this proposal would translate to about 20 percent.

Marcie Luhigo, who represents The Creek Christian Church, a 4,000-member church on the southeast side of Indianapolis, told the panel, “Every year, our church gives $200,000 that I’m in charge of distributing to those in financial need in our community. I can tell you that, in my five-year tenure, hundreds have come to us with payday loans that they are unable and incapable of repaying. We would oppose any expansion of payday lending.”

Jim Bauerle, a retired brigadier general, said one of the biggest problems in the military is financial hardship experienced by young soldiers and those returning from deployment. He said that many of those individuals experience unemployment and homelessness, and some get themselves into debt through these types of high interest loans. Bauerle said his parish on the north side of Indianapolis takes in needy veterans, and they contribute 10 percent of their weekly collections to help those needing financial assistance or to pay for household repairs.

Representatives of several other organizations testified in opposition to the bill, including the Indiana Institute of Working Families; United Methodist Church; Christian Legal Aid; the Society of St. Vincent de Paul; Indiana Synod Evangelical Lutheran Church of America; and several veterans groups.

Heather Willey, who represented payday loan providers, testified in support of the bill, saying the proposal has retained safety procedures which includes lending to the employed with bank accounts. She added that loans may not exceed 20 percent of the borrower’s gross monthly income.

Lawmakers on the panel were not convinced the bill was prudent or needed. Two lawmakers who supported the bill did so to give the author of the legislation an opportunity to work on the bill, but they were not convinced of the bill’s merits. Five members who voted against the bill recognized the negative effects of these loans on families.

Sen. Eddie Melton, D-Merrillville, said he felt the industry needed “more transparency” and voted “no.” Sen. Roderick Bray, R-Martinsville, said while he appreciated the efforts to make a good product, he has not detected a “human cry” for this product. Sen. John Ruckelshaus, R-Indianapolis, also voted “no,” saying he was “not comfortable going forward.”

Tebbe said even though this bill has been defeated, the topic could be resurrected and amended to another bill before the Indiana General Assembly adjourns.

“The ICC and others plan to work toward stopping it if necessary,” he said.

For more information on the status of bills the ICC is following, join the Indiana Catholic Action Network at www.indianacc.org.
 

(Brigid Curtis Ayer is a correspondent for The Criterion.) †